Taxation

The Taxation Section of the Ohio Attorney General’s Office represents the Tax Commissioner of Ohio, who is charged with administering and enforcing most of the State’s taxes, including the state income tax, state sales and use taxes, and several business and excise taxes. The Section defends the Commissioner’s administrative decisions on tax assessments, refund applications, real property exemption applications when they are appealed to the Ohio Board of Tax Appeals (the “BTA”). We also defend the Commissioner when administrative rules that he promulgated are challenged. Because the BTA’s decisions can be directly appealed to the Ohio Supreme Court or to one of the State’s courts of appeal, the Taxation Section has a significant appellate docket.

The Taxation Section also represents the Commissioner in civil proceedings, including constitutional challenges to the State’s tax laws. Recently, attorneys in the section successfully sought the dismissal of two purported class actions filed against the Commissioner that related to sales tax refunds. See Telsat, Inc. v. Micro Center, Inc., 10th District No. 10AP-229, 2010-Ohio-5628. The Section’s attorneys defend the Tax Commissioner’s determinations of estate tax liability from challenges filed in probate courts throughout the state.

If a taxpayer has been assessed and either fails to timely appeal a decision of the Commissioner or the taxpayer’s appeal is ultimately unsuccessfully, any unpaid assessment is certified by the Ohio Department of Taxation to the Attorney General’s Collection Enforcement Section.

Recent Successes:

In 2010, Barton Hubbard, a Principal Attorney in the Section, was a member of the team recognized by the National Association of Attorneys General with the Best Brief Award as a result of exceptional work in addressing the fundamental issue of federalism in the United States Supreme Court case Levin v. Commerce Energy, Inc., 130 S. Ct. 2323; 176 L. Ed. 2d 1131 (2010). The team’s efforts were successful as the Court unanimously held that principles of comity prohibit federal courts from entertaining complaints of discriminatory state taxation even when the relief sought is an increase in a competitor’s tax burden.

The Taxation Section and Solicitor’s Office worked together to convince the Ohio Supreme Court that Ohio’s imposition of sales and use tax on satellite broadcasting services but not on cable broadcasting services did not violate the Commerce Clause of the United States Constitution. DIRECTV, Inc. v. Levin, 128 Ohio St.3d 68, 2010-Ohio-6279. The satellite companies have filed a petition for writ of certiorari with the United States Supreme Court. As of 2009, the amount of tax revenue at issue was approximately $125 million with an additional approximate amount of $36 million annually going forward.

The Taxation Section has also recently successfully defended the commercial activity tax (“CAT”) from two constitutional challenges. In Ohio Grocers Assn. v. Levin, 123 Ohio St.3d 303, 2009-Ohio-4872, the Section teamed up with the Solicitor’s Office to convince the Ohio Supreme Court that the CAT is not a tax on the sale or purchase of food and, therefore, does not violate provisions of the Ohio Constitution (Section 3(C) or 13 of Article XII) that prohibit such a tax. The Ohio Grocers Association had sought an exemption from the CAT, claiming it violated the ban on taxing food sales. The Court ruled that the CAT “is a tax on the privilege of doing business” and the “fact that the tax is measured by gross receipts that include proceeds from the sale of food does not affect the constitutionality of [the CAT].” This decision preserved $188 million in annual revenue for Ohio and represented a critical ruling for local government funding.

Earlier this year, the Tenth District Court of Appeals upheld the CAT against a challenge that its application to motor fuel sales violated Section 5a of Article XII of the Ohio Constitution. Beaver Excavating Company v. Levin, 10th Dist. No. 10AP-581, 2011-Ohio-3649. The estimated annual CAT revenue at issue in this case is approximately $139 million.